At Hearing, Warren Calls for Strong Anti-Money Laundering Protections to Prevent Cryptomines from Undermining U.S. National Security
Washington, D.C. – At a hearing of the Senate Committee on Banking, Housing, and Urban Affairs, U.S. Senator Elizabeth Warren (D-Mass.) questioned the Honorable Paul Rosen, Assistant Secretary for Investment Security, Department of the Treasury, on the threat posed by foreign-owned cryptocurrency mining facilities on U.S. soil.
Senator Warren highlighted the environmental and national security threat of cryptomining facilities, including risks posed by the one-third of cryptomining facilities in the United States that are owned by citizens of the People’s Republic of China, including people with direct ties to the Chinese government. Assistant Secretary Rosen confirmed that these cryptomines can be used for espionage, and that they pose a national security threat to the U.S. energy sector, energy resources, and energy supply chain.
Assistant Secretary Rosen also confirmed the need for anti-money laundering laws to prevent foreign nationals from secretly making investments, like using crypto to purchase crypto mining facilities in the U.S., without the government’s knowledge. Senator Warren called for Congress to pass laws that give the Treasury Department the tools it requested last year to prevent foreign adversaries from using crypto to evade sanctions and launder money.
Transcript: Hearing on Advancing National Security through Export Controls, Investment Security, and the Defense Production Act
Senate Committee on Banking, Housing, and Urban Affairs
July 25, 2024
Senator Elizabeth Warren: Thank you, Mr. Chairman. So, the Committee on Foreign Investments in the United States, or CFIUS, reviews foreign investments in our country to make sure they don't pose a risk to national security.
Increasingly, foreign companies are building cryptomining facilities on U.S. soil. These mines are actually warehouses stuffed with computers that process crypto transactions and produce new crypto tokens. They’re loud, they’re hot, and they suck up a ton of electricity, which can crash the power grid. And that’s why many countries have banned cryptomining, leading more foreign companies to set up shop here in the United States. According to a blockchain analytics firm, one third of cryptomining facilities in the U.S. are owned by citizens of the People's Republic of China, including people with direct ties to the Chinese government.
Cryptomining is a disaster for the environment, and it can pose national security risks as well. In May, at CFIUS’ recommendation, President Biden issued an order requiring the Chinese national owners of a cryptomining facility in Wyoming called MineOne to divest their ownership and remove the cryptomining equipment from the premises.
Assistant Secretary Rosen, you are the head of CFIUS, so you oversaw the investigation into MineOne and told the president that the divestment was essential. The divestment order cited two primary factors. One, the technology inside of the mine could be used for surveillance. Two, MineOne was located one mile from a strategic missile base housing intercontinental ballistic missiles. So, I want to ask you if the equipment inside of the crypto mine could have been used to spy on our military operations and our nuclear weapons systems?
The Honorable Paul Rosen, Assistant Secretary of the Treasury for Investment Security: Senator, thank you for the question and pointing out this case in particular. I'm limited in terms of what I can say about this particular transaction, but to answer your question there is a generalized concern that sophisticated equipment in proximity to sensitive facilities can be used for espionage.
Senator Warren: Ok, can be used for espionage. Foreign adversaries are using cryptomines to spy on U.S. military operations. That is an obvious national security risk. But it isn't the only risk. Foreign-owned cryptomines also threaten the energy grid.
According to an analysis by the New York Times, Bitcoin mines in the U.S. owned by Chinese nationals use enough energy to power 1.5 million homes. National security experts have warned that foreign-owned cryptomining facilities’ connection to our energy grid could leave the U.S. vulnerable to targeted blackouts and cyber attacks.
Assistant Secretary Rosen, if China, or another foreign country, had the power to crash a significant portion of our country’s power infrastructure, could that threaten national security?
Mr. Rosen: Of course, an impact on our energy sector, our energy resources, our energy supply chain could very much have a national security impact.
Senator Warren: There is yet another risk as well. Foreign nationals have been able to buy up cryptomines in the United States in secret. How? By paying in crypto. Crypto allows them to bypass our traditional banking system and the anti-money laundering rules that are supposed to prevent any anonymous foreign money from coming into the U.S. In fact, that is exactly how a Chinese investor was able to secretly buy a $6 million cryptomine in Texas. It is also how U.S.-based cryptomines have been able to secretly send millions of dollars back to China.
Assistant Secretary Rosen, do you agree that we need to plug the holes in the anti-money laundering rules that have allowed foreign nationals to secretly purchase U.S. cryptomining facilities or make other kinds of investments in the U.S. without our knowing about it?
Mr. Rosen: Senator, I certainly share your concern over ultimate beneficial ownership and making sure we know who is doing the buying. I can speak for the CFIUS context, when we look at a transaction, or try to find a transaction, that’s a critical component to our diligence.
Senator Warren: All right. Cryptomines could be used by our adversaries to spy on military bases, or to bring down the power grid, or move money in and out of the country in secret. Last year the Treasury Department requested additional tools from Congress to prevent China, Iran, Russia, and other foreign countries from using crypto to evade sanctions and launder dirty money. It is time for us to pass laws, laws that Treasury needs. Thank you, Mr. Chairman.
###
Previous Article
